Netflix Inc. (NASDAQ:NFLX)

Solvency ratios demonstrate a generally improving financial position over the five-year period. A consistent trend of decreasing leverage is observed, alongside strengthening coverage metrics. These indicators suggest a reduced reliance on debt financing and an increased ability to meet financial obligations.

Debt Levels

The Debt to Equity ratio decreased from 0.97 in 2021 to 0.54 in 2025, indicating a diminishing proportion of debt relative to shareholder equity. A similar downward trend is evident in the Debt to Capital ratio, moving from 0.49 to 0.35 over the same period. Including operating lease liabilities, the ratios show a comparable, though less pronounced, decline. Debt to Assets ratios also decreased consistently, from 0.35 to 0.26, and from 0.41 to 0.31 when including operating lease liabilities.

Leverage

Financial leverage, measured as total assets to total equity, decreased from 2.81 in 2021 to 2.09 in 2025. This decline signifies a reduced amplification of returns (and losses) through the use of debt. The rate of decrease slowed between 2022 and 2023, but resumed in subsequent years.

Coverage Ratios

Interest Coverage, representing the ability to pay interest expenses from earnings, increased substantially from 8.63 to 17.38. This indicates a significantly improved capacity to service debt obligations. Fixed Charge Coverage, a broader measure encompassing all fixed financial obligations, also exhibited a positive trend, rising from 5.46 to 9.55, demonstrating a strengthening ability to meet all fixed financial commitments.

The consistent improvement across these solvency metrics suggests a strengthening financial foundation. The decreasing debt ratios, coupled with increasing coverage ratios, indicate a reduced risk profile and enhanced financial flexibility.

The debt to equity ratio demonstrates a declining trend over the five-year period. Initially, the ratio stood at 0.97 in 2021, indicating that total debt was nearly equivalent to stockholders’ equity. Subsequent years reveal a consistent decrease in this ratio, suggesting a strengthening financial position with respect to leverage.

Debt to Equity Ratio Trend

In 2022, the ratio decreased significantly to 0.69, representing a substantial reduction in debt relative to equity. This decrease continued, albeit at a slower pace, with the ratio reaching 0.71 in 2023.

The downward trend resumed in 2024, with the ratio falling to 0.63. This indicates continued efforts to manage debt levels or growth in equity.

By 2025, the ratio had further decreased to 0.54, the lowest value observed during the analyzed period. This signifies that stockholders’ equity substantially exceeds total debt, indicating a more conservative capital structure.

The observed pattern suggests a deliberate strategy to reduce reliance on debt financing or a significant increase in equity funding. The consistent decline in the debt to equity ratio generally implies reduced financial risk and improved solvency. The company appears to be increasingly financed by equity rather than debt, which could enhance its long-term financial stability.

The Debt to Equity ratio, including operating lease liability, demonstrates a consistent downward trend over the five-year period. Total debt remained relatively stable, fluctuating between approximately US$16.9 billion and US$18.1 billion, while stockholders’ equity exhibited a clear upward trajectory.

Debt to Equity Ratio Trend

The ratio decreased from 1.14 in 2021 to 0.64 in 2025. This indicates a strengthening financial position, as the proportion of debt financing relative to equity financing has diminished.

Total Debt

Total debt experienced a decrease from 2021 to 2022, followed by relative stability through 2024, and a slight decrease in 2025. The fluctuations were not substantial, suggesting a consistent approach to debt management.

Stockholders’ Equity

Stockholders’ equity increased steadily throughout the period, rising from US$15.8 billion in 2021 to US$26.6 billion in 2025. This growth likely reflects retained earnings and potentially new equity issuances, contributing to the declining Debt to Equity ratio.

The observed trend suggests a decreasing reliance on debt financing and an increasing reliance on equity financing. This shift could be viewed favorably by investors and creditors, indicating improved financial flexibility and reduced risk.

The debt to capital ratio demonstrates a consistent downward trend over the five-year period. Initially, the ratio stood at 0.49 in 2021, and has decreased each year to reach 0.35 in 2025.

Total Debt

Total debt fluctuated over the period, beginning at US$15,392,895 thousand in 2021. It decreased to US$14,353,076 thousand in 2022, then increased slightly to US$14,543,261 thousand in 2023. A further increase was observed in 2024, reaching US$15,582,804 thousand, before decreasing again to US$14,462,836 thousand in 2025. Despite these fluctuations, the overall level of debt remained relatively stable.

Total Capital

Total capital exhibited a consistent upward trend throughout the period. Starting at US$31,242,143 thousand in 2021, it increased to US$35,130,477 thousand in 2022 and remained approximately constant at US$35,131,574 thousand in 2023. Further growth was seen in 2024, reaching US$40,326,371 thousand, and continued into 2025, reaching US$41,078,324 thousand.

Debt to Capital Ratio

The declining debt to capital ratio suggests a strengthening of the capital structure. The decrease from 0.49 in 2021 to 0.35 in 2025 indicates that the proportion of debt financing relative to total capital has diminished. This could be attributed to an increase in equity financing, retained earnings, or a combination of both. The consistent decrease suggests a reduced reliance on debt and potentially improved financial flexibility.

The observed trend implies a decreasing level of financial risk associated with debt financing. The company appears to be increasingly funded by capital sources other than debt.

The Debt to Capital ratio, inclusive of operating lease liabilities, demonstrates a consistent downward trend over the five-year period. Total debt, including operating lease liability, fluctuated modestly, while total capital exhibited a general increase. This combination resulted in a decreasing ratio, indicating a strengthening solvency position.

Debt to Capital Ratio Trend

The ratio decreased from 0.53 in 2021 to 0.39 in 2025. This represents a 26.4% reduction in the proportion of debt financing relative to total capital over the observed period.

Total Debt (including operating lease liability)

Total debt decreased from US$18,116,570 thousand in 2021 to US$16,931,564 thousand in 2022. It then experienced a slight increase to US$16,973,374 thousand in 2023, followed by a further increase to US$17,994,974 thousand in 2024. Finally, it decreased to US$16,975,837 thousand in 2025, returning to levels similar to those observed in 2022 and 2023.

Total Capital (including operating lease liability)

Total capital increased from US$33,965,818 thousand in 2021 to US$37,708,965 thousand in 2022, and continued to rise to US$37,561,687 thousand in 2023. A more substantial increase was observed in 2024, reaching US$42,738,541 thousand, and continued to US$43,591,325 thousand in 2025. This consistent growth in total capital contributed significantly to the declining Debt to Capital ratio.

The observed trend suggests a decreasing reliance on debt financing and an increasing reliance on other forms of capital. This could indicate improved financial flexibility and a reduced risk profile, although a comprehensive assessment would require analysis of other solvency and liquidity metrics.

The Debt-to-Assets ratio demonstrates a consistent downward trend over the five-year period. This indicates a decreasing reliance on debt financing relative to the company’s total asset base.

Overall Trend

The ratio declined from 0.35 in 2021 to 0.26 in 2025. This represents a 25.7% decrease over the observed timeframe, suggesting improved financial leverage.

Year-over-Year Changes

The most significant decrease occurred between 2021 and 2022, with a reduction from 0.35 to 0.30. Subsequent annual changes were more moderate. The ratio remained stable at 0.30 between 2022 and 2023.

Recent Performance

From 2023 to 2024, the ratio decreased slightly from 0.30 to 0.29. The largest recent change occurred between 2024 and 2025, with a decrease to 0.26. This suggests a continued, albeit more gradual, reduction in debt relative to assets in the most recent year.

The consistent decline in the Debt-to-Assets ratio suggests the company is becoming less financially risky from a solvency perspective. This could be due to increased profitability, asset growth outpacing debt accumulation, or deliberate debt reduction strategies.

The Debt to Assets ratio, including operating lease liability, demonstrates a generally decreasing trend over the five-year period. Total debt remained relatively stable, fluctuating between approximately US$16.9 billion and US$18.1 billion, while total assets consistently increased. This combination resulted in a declining ratio, indicating a strengthening solvency position.

Overall Trend

A consistent downward trend is observed in the Debt to Assets ratio, moving from 0.41 in 2021 to 0.31 in 2025. This suggests a decreasing reliance on debt financing relative to the company’s asset base.

Year-over-Year Changes

The most significant decrease occurred between 2021 and 2022, with the ratio falling from 0.41 to 0.35. Subsequent annual changes were more moderate. From 2022 to 2023, the ratio remained constant at 0.35. A slight decrease to 0.34 was noted between 2023 and 2024, followed by a further decrease to 0.31 in 2025.

Debt and Asset Movements

Total debt experienced a decrease from 2021 to 2022, then stabilized before increasing slightly in 2024. However, the increase in debt was outpaced by the growth in total assets. Total assets increased steadily throughout the period, from US$44.6 billion in 2021 to US$55.6 billion in 2025. This consistent asset growth is the primary driver of the declining Debt to Assets ratio.

The observed trend suggests improving financial leverage and a reduced risk of insolvency. The company appears to be effectively managing its debt levels while simultaneously growing its asset base.

An analysis of the provided financial information reveals a consistent trend in financial leverage over the five-year period. Total assets exhibited growth throughout the period, while stockholders’ equity also generally increased, though with a slight decrease between 2022 and 2023. The financial leverage ratio, which indicates the extent to which a company relies on debt to finance its assets, demonstrates a decreasing pattern.

Financial Leverage

The financial leverage ratio decreased from 2.81 in 2021 to 2.09 in 2025. This indicates a reduction in the proportion of assets financed by debt. The most significant decrease occurred between 2021 and 2022, falling to 2.34. Subsequent declines were more moderate, moving to 2.37 in 2023, 2.17 in 2024, and finally reaching 2.09 in 2025.

The observed decrease in financial leverage suggests a strengthening of the company’s financial position. This could be attributed to increased equity financing, debt reduction, or a combination of both. While total assets increased over the period, the growth in stockholders’ equity largely kept pace, contributing to the lower leverage ratio. The slight dip in stockholders’ equity between 2022 and 2023 did not significantly alter the overall downward trend in leverage.

The consistent decline in financial leverage implies a reduced risk profile for the company, as it is becoming less reliant on debt. This could potentially lead to lower interest expenses and greater financial flexibility in the future.

The interest coverage ratio demonstrates a generally positive trend over the five-year period. Earnings before interest and tax (EBIT) and interest expense figures support this observation. Initial values indicate a strong ability to meet interest obligations, which strengthens over time.

Overall Trend

The interest coverage ratio exhibits an increasing trend from 8.63 in 2021 to 17.38 in 2025. This suggests a growing capacity to cover interest expenses with operating earnings.

EBIT Analysis

EBIT experienced a decrease from 2021 to 2022, moving from US$6,605,723 thousand to US$5,970,141 thousand. However, it subsequently increased each year, reaching US$13,499,062 thousand in 2025. This growth in EBIT is a primary driver of the improving interest coverage ratio.

Interest Expense Analysis

Interest expense remained relatively stable between 2021 and 2023, fluctuating between US$699,826 thousand and US$765,620 thousand. A slight increase is observed in 2024 and 2025, reaching US$776,510 thousand. Despite this increase, the growth in EBIT outpaced the rise in interest expense, contributing to the improved coverage ratio.

Ratio Fluctuations

The dip in EBIT in 2022 resulted in a slight decrease in the interest coverage ratio to 8.45. However, the subsequent recovery and growth in EBIT led to a consistent increase in the ratio, peaking at 17.38 in 2025. The ratio’s increase from 9.87 in 2023 to 14.87 in 2024 represents a significant improvement in the company’s ability to service its debt.

In conclusion, the observed trends indicate a strengthening financial position with respect to interest-bearing liabilities. The company demonstrates an increasing ability to comfortably meet its interest obligations, as evidenced by the rising interest coverage ratio.

The company demonstrates a generally improving ability to cover its fixed charges over the five-year period. Earnings before fixed charges and tax experienced fluctuations, while fixed charges consistently increased. However, the fixed charge coverage ratio itself exhibited a positive trend, indicating strengthening solvency.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax decreased from US$7,148,293 thousand in 2021 to US$6,578,569 thousand in 2022, representing a decline. A subsequent increase was observed in 2023, reaching US$7,543,909 thousand. This upward trajectory continued through 2024 and 2025, with earnings reaching US$11,350,363 thousand and US$14,210,023 thousand respectively. This indicates a significant improvement in profitability over the latter part of the analyzed period.

Fixed Charges

Fixed charges exhibited a consistent upward trend throughout the period. Starting at US$1,308,190 thousand in 2021, they increased to US$1,314,640 thousand in 2022, US$1,338,504 thousand in 2023, US$1,384,706 thousand in 2024, and finally reached US$1,487,471 thousand in 2025. This steady increase suggests growing financial obligations related to fixed costs.

Fixed Charge Coverage

The fixed charge coverage ratio initially decreased from 5.46 in 2021 to 5.00 in 2022, coinciding with the decline in earnings before fixed charges and tax. The ratio then improved to 5.64 in 2023. A substantial increase was observed in 2024, with the ratio reaching 8.20, and this positive trend continued into 2025, with a ratio of 9.55. This demonstrates a strengthening capacity to meet fixed financial obligations despite the increasing absolute value of those charges. The increasing ratio suggests improved financial health and reduced risk of default.

In summary, while fixed charges increased annually, the company’s earnings growth outpaced this increase, resulting in a consistently improving fixed charge coverage ratio. This suggests a strengthening financial position and an enhanced ability to service its fixed financial obligations.